Emergency financial manager bill moves forward

ºLegislation would give more power to state in takeovers.

A bill that would increase the power state- appointed emergency financial managers have when they are hired to fix a municipality or school district's finances is moving forward.

House Bill 4214, authored by state Rep. Al Pscholka, R-Stevensville, would not only give the EFMs more control, it would also put in place additional regulation to help prevent a takeover in the first place by allowing state intervention at an earlier stage.

The House of Representatives passed the bill earlier this week; it will go before the Michigan Senate next week.

Currently, the state does not typically get involved in the financial matters of a government unit until it has been called into investigate whether an EFM is needed.

"We're looking at preventable medicine here," Pscholka said. "That is cheaper than a trip to the emergency room."

Pscholka said the bill was not crafted based just on the tumultuous issues currently going on in Benton Harbor, which has an EFM. The city's elected officials there and EFM Joseph Harris are continuously locking horns over issues to help the city get in the black again. Benton Harbor lies in Pscholka's district.

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"In Berrien County in the last two years, we've had three instances," he said.

Pscholka said the village of Stevensville was

able to prevent a state takeover itself by "putting the village on a diet." The village of Three Oaks was taken over by an EFM but has since had power returned to village officials.

The bill package creates a process for early state assistance to prevent bankruptcies and defines the circumstances under which a local unit can return from a state of fiscal emergency, according to Pscholka. In the event that a manager does need to be appointed, that manager would have the authority to renegotiate contracts, sell assets, set minimum staffing levels and enter in consolidation of service agreements. The state would then have the ability to get involved in employees' collective bargaining agreements with the municipality.

Early intervention could be, but not be limited to, state reviews if the municipality or government agency has been making late payments of bills, late payment to other municipalities, deficits occur, or nonpayment of pensions.

"The whole idea of the bill is we don't get there," Pscholka said. "We try and make it easier for locals to work for the department of treasury."

An aspect of Pscholka's original bill before it was amended in the House called for a 10-year ban of elected officials currently in office if a state takeover is authorized. It was amended down to six years before being taken out of the bill altogether.

However, Pscholka said the legislation the way it stands now would basically strip all powers elected officials have. A section also says the board, once the EFM leaves, cannot touch a budget for two years that had already been put in place.

"It gives the EFMs a little more power," he said. "The local board has no authority."

Pscholka said the current law makes it "very hard for any emergency manager to be able to do the job."

Another important aspect of the bill, according to Pscholka, is that expenditures by an emergency manager have to be posted on a website "so everyone can see it." Any asset more than $60,000 has to be approved by the state treasurer.

In Benton Harbor, Pscholka said, significant financial problems and funding mismanagement over the course of several years led to an EFM.

"The local officials (there) have not been cooperative," he said. "They're just trying to impede the emergency manager's work.

"This is not about personalities to me. This is simply about finances and accountability and protecting taxpayers."

Some Benton Harbor officials, including Mayor Wilce Cooke, came to Lansing this week to testify against the legislation.

Neither Cooke nor EFM Harris have returned several messages seeking comment over the past several months.